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Mobile Lessons From Payment Space Invaders

Like in the classic Atari game, a solid offense is the best way to defend against outside companies coming between you and your members. The business models of these popular companies compete with credit unions, so know what makes them appealing to users and how to replicate or enhance those experiences in your own offerings.

Venmo

What Is It?

A peer-to-peer (P2P) payment solution that allows multiple parties to send payments to a single person for a shared bill — such as in a restaurant scenario.

What It Gets Right

Users, who are mostly in the 18-to-24 age range, can sync their bank accounts, debit cards, and Venmo balances within the app and send money to or from accounts for free. Users can even send money requests and allow friends access to their funds. According to Business Insider, Venmo processed $468 million in transactions in second quarter 2014.

Your Strategy For Defense

Many P2P solutions tend to work best in less formal scenarios. For example, Venmo charges users a 3% sender fee for credit card transactions, has a $2,999.99 weekly limit, and is not designed for merchant payments. This opens the door for credit unions to offer expanded usage scenarios — paying with a credit union credit card, paying international recipients or high-dollar amounts, making point of sale purchases, etc. — without extra fees and with full banking-level security.

PayPal's One Touch

What Is It?

A solution from PayPal that allows shoppers to pay a bill at a participating mobile merchant with a single tap.

What It Gets Right

One Touch eliminates the need to re-enter credit card numbers or remember a multitude of account usernames and passwords for electronic purchases, which ramps up convenience and checkout speed.

Your Strategy For Defense

Single sign-ons have already proven a winning option with members for in-house channels like online/mobile banking, and using tokenization to hide personal payment credentials is a convenient way to extend that same level of convenience to financial interactions that occur outside your own walls. Pay close attention to options like QR codes, which require little to no preparation and no subsequent follow-up steps, over more extraneous processes that could delay the natural flow of the transaction.

Starbucks Mobile Wallet

What Is It?

An in-house payment app that allows Starbucks customers to make point of sale purchases using using a QR code.

What It Gets Right

In addition being part of a loved brand, the app is tied to the type of quick-hit, low-dollar transactions where the convenience of a mobile wallet shines. Users can track purchases and earn rewards from their mobile phone — eliminating the need for the old-fashioned punch card rewards. According to PaymentsSource, Starbucks customers used the app for approximately 4.5 million transactions a week in 2013.

Your Strategy For Defense

It takes compatibility with more than one merchant to bring real value to a mobile wallet. Although consumers might upload one or two credit cards to the Starbucks mobile wallet, the coffee merchant is unlikely to capture all of the payment vehicles — and thus all of the accompanying payment data — of its customers. Wallets built and managed by financial institutions, however, are a natural home for all card accounts, and the incorporation of merchant rewards are likely to make such options a top-of-phone choice over wallets tied to a specific store.

T-Mobile's Mobile Money

What Is It?

A service that pairs a prepaid Visa card — which users can reload with cash at T-Mobile stores or by direct deposit — with a mobile app.

What It Gets Right

Released in January 2014, the app/card combo is meant to be a financial services alternative for people that don't have bank accounts but do have smartphones. It lets users deposit and cash checks from the phone, withdraw money from one of 42,000 ATMs nationwide, and send money person-to-person. Fees for things like retail purchases, remote deposit capture, and ATM withdrawals are reduced or eliminated for T-Mobile subscribers.

Your Strategy For Defense

Just because a consumer is unbanked doesn't mean they're low-tech or cannot benefit from the evolution taking place in the payments space. Rather than pushing these individuals into bare bones prepaid programs, look for ways to make these cards support and cut costs for mobile financial services and vice versa, across all segments of your member population.

Square's Capital

What Is It?

A program that offers cash advances to the 2 million businesses that use the Square mobile card reader.

What It Gets Right

In lieu of monthly interest payments, Capital borrowers repay the advance and a flat fee by giving 10% of their daily credit card sales to Square. Borrowers are eligible for an advance based on the volume of sales made using the reader, among other requirements, and can adjust their payments depending on the strength of their sales. Square spokesperson Faryl Ury says the company has advanced “tens of millions of dollars” through the service, reports foxbusiness.com.

Your Strategy For Defense

Square has leveraged its existing relationships in the payments field to open new areas of business, but its flat fee offers no incentive for borrowers to repay the advance quickly. Even with the Capital offshoot, Square supports only a few components of a small business' daily operation. Compare this to the wealth of supporting services an established financial institution can provide and it's no contest. Still, credit unions should frequently look at the needs of the businesses they are serving to see where they might need to adjust their product offerings, loan qualification standards, or repayment plans.